The prospect of a political deal between Pakistan's President Pervez Musharraf and archrival Benazir Bhutto, one of Pakistan's most popular politicians and the self-exiled leader of one of Pakistan's largest democratic parties, now appears dead.

In an interview on Monday, Ms. Bhutto said that the killing of dozens of citizens in Karachi by a pro-government mob on Saturday has shattered her interest in cooperating with Mr. Musharraf. Such an arrangement, according to rumors, would have lent legitimacy to Musharraf's declining regime while sparing her prosecution from corruption charges. "With 42 people dead in Karachi I just cannot envisage such a thing at this moment," she said. As Bhutto recalled a phone conversation with a boy in Karachi who lost his 18-year-old brother in the shootings, tears appeared in her eyes.

A deal between Musharraf and Bhutto might have been a highly pragmatic solution to ending Pakistan's growing political crisis, Pakistani analysts and Western observers say, because Bhutto brings the patina of democracy, popular support, and international legitimacy to Musharraf's strong arm in dealing with the Taliban. But others worry that Bhutto's deal would essentially bless Musharraf's military dictatorship, effectively splintering opposition to the military regime. Calling off the deal would likely have a dramatic impact on the political landscape, analysts say, encouraging the opposition to bring an organized front to bear against Musharraf as elections loom.

Bhutto heads the Pakistan People's Party (PPP), a moderate opposition party that most analysts say has the largest support of any political group in Pakistan. Elected prime minister twice in 1988 and 1993, she has lived in self-exile since 1999, when Musharraf took power in a bloodless coup and launched a series of corruption cases against her. The daughter of former Prime Minister Zulfikar Ali Bhutto, who was overthrown and later executed, Bhutto was the first woman to head a post-colonial Muslim state.

At her home in exile, Bhutto admitted that, from the end of last year until the beginning of this year, she has been speaking with the Musharraf government about possible political cooperation. She refused to elaborate, but Pakistani newspapers have speculated for months that Musharraf, faced with the worst crisis of his administration, was looking for a new coalition partner to bail him out.

As part of the rumored arrangement, many have speculated that Musharraf was prepared to drop the corruption charges against Bhutto, allowing her to return to Pakistan as prime minister while he would remain the president, possibly in uniform.

The closure of a wing in the country's National Accountability Bureau last month, which specialized in corruption charges against Bhutto, seemed to indicate that Musharraf had made that concession. But Bhutto, who vehemently denies the allegations, said the charges still stand.

Although she would not go into details, Bhutto says the talks had already been faltering because she distrusted Musharraf's side. She referred to an assassination attempt earlier this year against her sister-in-law, PPP Member of Parliament Azra Zardari. Police refused to file a criminal complaint against a provincial minister and his bodyguards who were accused of the shooting attempt.

"Now it has been just talk," Bhutto said. "My sister-in-law was fired upon, and the police refused to file her case in February. When we are discriminated against we begin to ask questions like 'how sincere are they?' "

Weighing legitimacy against stability

Calling off the deal is likely to worry some Western officials in Islamabad, who say that a Bhutto-Musharraf alliance topped their list of options for bringing greater stability to Pakistan.

"We think that a deal with the PPP would strengthen [Musharraf's] political base, which would strengthen his mandate to act against terrorism," says a Western official, who asked not to be named because he is not authorized to speak to the media.

But while such a deal may bring stability to Pakistani politics, many critics say Bhutto's return would effectively legitimize Musharraf's military dictatorship, delivering a grave blow to democracy.

"The deal was viewed as collusion. In one way, Musharraf's rule will be strengthened, and he'll probably be allowed to have another term," argues Sajjad Naseer, a political science professor at the Lahore School of Economics, adding that many doubt Musharraf would grant any real power to Bhutto even if she were prime minister.

"If the democratic process is given a chance to operate, this itself will dampen whatever extremism or terrorism exists. At least it will settle domestic politics at the moment," he says, adding that, with the deal seemingly called off, the prospect of the opposition parties uniting is better for stability in the long run.

Former Prime Minister Nawaz Sharif, with whom Bhutto had formed a political alliance, is also considering a return from exile. Mr. Sharif recently told The Times of London that Musharraf's power is "totally exhausted" and his fall is "simply a matter of time."

"I have every intention of going back to my country," the Times reported Sharif as saying.

Lost opportunities

But as Musharraf weakens, the chance to start a government of moderate parties is fading, Bhutto said.

"I think that if General Musharraf does that, he can bargain with the political parties. All the moderate parties should be included," Bhutto said. "But I can't talk about him having a chance right now because the passions are running so high in Karachi that people will not hear of it."

Talat Hussain, director of news at the Pakistani television station Aaj in Islamabad, says that Bhutto, sharing the same moderate views as Musharraf, is a natural ally. But the weaker Musharraf becomes, he adds, the more improbable a deal between Musharraf and Bhutto becomes.

"If she sees Musharraf truly weak and declining or falling, she will not go on with this deal," says Mr. Hussain. "If she believes Musharraf is going to stay strong she'll go through with this deal and come into Pakistan."

Bhutto says that she will return to Pakistan this year with or without a political solution. "No matter what, I am going back this year. I have to go back because I have been out for too long."